Why Grocery Outlet Stock Fell Today

What happened

Shares of Grocery Outlet Holding (NASDAQ:GO) declined by 5.2% on Wednesday, following the release of the discount supermarket chain’s third-quarter results. 

So what

Sales jumped 17.1% to $764.1 million, driven by new store openings and a 9.1% rise in comparable-store sales. The chain opened 10 new locations during the third quarter, bringing its store count to over 370.

“While we continue to navigate COVID, we are actively reinvesting in our people and operational initiatives in support of our long-term growth objectives,” CEO Eric Lindberg said in a press release. “We remain excited about our ample white space for retail expansion and the opportunity to continue to deliver tremendous values to our loyal customers.”

A person is pointing to a digital stock chart that rises sharply then falls.

Grocery Outlet’s stock sank on Wednesday despite delivering strong growth metrics. Image source: Getty Images.

Moreover, Grocery Outlet is becoming more profitable as it expands its store base. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 25.1%, to $55.3 million year over year.

Now what 

Before today, Grocery Outlet’s stock price had surged more than 30% in 2020, so it’s possible investors decided to take some profits off the table following its third-quarter report.

Yet shareowners focused on the long term may want to hold on to their stock, as Grocery Outlet’s expansion remains in its early innings. The chain expects to open a total of 34 locations this year, and it plans to grow its store count at roughly 10% annually in the coming years. Looking further ahead, management sees the potential for as many as 4,800 stores in the U.S. alone.

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